US Performance Bonds for Canadian Contractors
The bond that follows the US bid bond is written at 100 percent of the contract price, not the 50 percent you are used to at home — and on private work it hands the surety a menu of options you have no say over. Here is how the US performance bond actually behaves, and what to settle before notice to proceed.
What Is a US Performance Bond?
A US performance bond guarantees that the contractor will complete the contract according to its terms. The contractor is the principal, the owner or contracting agency is the obligee, and a surety stands behind the obligation. If the contractor defaults, the surety either arranges completion or pays — and then recovers from the contractor under the indemnity. It is credit, not insurance — which is why a US performance bond is underwritten like a lending decision.
The shape will be familiar from a CCDC 221. What differs is the size, the trigger and, on private work, who controls the remedy.
- Federal work — the penal sum is 100 percent of the original contract price, on Standard Form 25, with a further 100 percent of any price increase
- The Miller Act itself sets no percentage — it requires only an amount the contracting officer considers adequate. The 100 percent figure comes from the regulation
- Private and quasi-public work — usually AIA A312-2010, a conditional bond the owner must unlock by satisfying a list of conditions
- Engineering-designed work — EJCDC C-610, built on the same architecture as A312 and common on water, wastewater and rural development projects
- State and municipal work — set by each state’s own statute and by the solicitation, and far less uniform than the federal rule
The performance bond never travels alone. Federally it is issued alongside a payment bond at the same 100 percent, so the aggregate penalty on a US federal job is roughly 200 percent of the contract value — against roughly 100 percent under the Canadian 50/50 convention. That is the single number to carry into a capacity conversation with your surety, and it comes straight from the federal bonding regulation.
Everything else about a US performance bond follows from that. A bigger penal sum means more capacity consumed, more indemnity exposure and a harder underwriting conversation — which is why the US payment bond and this bond should be arranged as one programme, before you bid.
Against the Form You Know
Four Ways a US Performance Bond Differs From a CCDC 221
One Hundred Percent, Not Fifty
Canadian practice commonly bonds performance at 50 percent of the contract price and labour and material payment at another 50. US federal practice is 100 and 100. Same contract value, roughly double the bonded exposure — and double the draw on your surety’s capacity.
Liquidated Damages Are In, Not Out
The 2024 Canadian performance bond expressly excludes liquidated damages and indirect or consequential damages. The standard US private form does the opposite: it makes the surety responsible for liquidated damages, or for actual delay damages where none are specified, along with additional legal, design professional and delay costs.
The Deadlines Sit on the Owner, Not the Surety
The Canadian form imposes hard clocks on the surety — four business days to acknowledge a notice, twenty to state its position. The US private form imposes none, only that the surety act “promptly”, with a seven-day cure after a second demand. Instead it loads a list of conditions onto the owner before the surety owes anything at all.
The Warranty Is Inside the Bond
On federal work the US performance bond’s conditions extend to performance during the life of any guarantee required under the contract, which pulls the standard one-year construction warranty inside the US performance bond. There is no separate federal maintenance bond to buy. On state and private work it depends entirely on the form.
When It Is Called
How a US Performance Bond Is Actually Triggered
On private and quasi-public work the dominant form is a conditional bond: the surety owes nothing until the owner has done a specific list of things in a specific order. That is good news for a contractor — it buys a structured conversation before anyone is declared in default — but only if you know the sequence well enough to insist on it.
The Owner’s Conditions Come First
The owner must notify contractor and surety that it is considering declaring a default. The surety may then request a conference within five business days, and unless the owner agrees otherwise that conference must be held within ten business days. Only after that may the owner declare the default, terminate the contract, notify the surety, and agree to pay the balance of the contract price. Miss the later steps and the surety’s obligation is not engaged.
The Surety Then Picks From Four Options
Once the conditions are met the surety must promptly do one of four things: arrange for the contractor to finish with the owner’s consent; take over and complete the work itself; obtain bids and tender a replacement contractor complete with equivalent bonds, paying any excess over the contract balance; or waive its right to complete and either pay what it determines it owes, or deny liability with reasons. The contractor does not choose.
The Seven-Day Mechanism
If the surety does not proceed with reasonable promptness, the owner sends a second written demand and the surety is deemed in default on the US performance bond seven days later — at which point the owner may complete the work its own way and pursue the surety for damages. The 2010 form cut this from fifteen days, and cut the pre-default waiting period sharply. If you see a twenty-day clock quoted anywhere, it comes from the 1984 edition, which expired at the end of 2011.
The Cap, and the Gap in It
Where the surety arranges completion, tenders a replacement, or waives and pays, its liability is capped at the US performance bond amount. That list omits one option — the surety undertaking to perform the contract itself. Where it self-performs, the cap does not apply on the face of the form and its obligations run to the contract terms. Most summaries of this bond miss the omission entirely; the Canadian form caps liability “under any circumstances”.
Two practical consequences follow. First, the balance of the contract price is the surety’s funding — so an owner who has overpaid the contractor or released retainage early has shrunk that balance and increased the surety’s loss. Sureties raise that as a defence, and it does not help you either way, because the indemnity still points at you. Second, when you are the obligee on a subcontractor’s bond, the same discipline binds you: completing a defaulted subcontractor’s work without giving the notices and terminating the subcontract can discharge the surety entirely.
The Obligee’s View
What the US Performance Bond Is Protecting
Completion at the Contract Price
The bond’s purpose is to put the owner in the position it bargained for: the work finished, to the contract documents, without the owner having to fund the overrun a failed contractor leaves behind. The surety’s exposure is the completion cost less the unpaid balance of the contract price.
Correction of Defective Work
The surety picks up the contractor’s responsibility to correct defective work as well as to finish it. Federally that obligation runs through the contract’s guarantee period, which is why no separate maintenance bond is required on a federal job.
A Contractor the Surety Has Already Vetted
Before a penny is at risk the owner has the benefit of a surety’s underwriting: financial capacity, work in progress, completed-job history and the character of the contractor. A bonded bidder has been prequalified by someone with money on the line.
Federal Work
Federal US Performance Bonds Run on a Different Track
Do not carry the private-form US performance bond mechanics onto a federal contract. Standard Form 25 is unconditional in form — there is no conference, no owner “agreement to pay the balance”, and no menu of surety options written into the US performance bond. The process is driven instead by the federal default clause and the termination regulations, and the contractor’s position is materially weaker.
The Government Can Simply Take Over
Under the fixed-price construction default clause the Government may take over the work and complete it by contract or otherwise, and may take possession of materials, appliances and plant on site. Contractor and sureties are liable for the resulting damage, including any increased cost of completing the work — whether or not the right to proceed was formally terminated.
Excusable Delay, and the Ten-Day Notice
The right to proceed is not terminated, and no damages are charged, where the delay arises from causes beyond the contractor’s control and without its fault — acts of God, government acts, fires, floods, epidemics, strikes, unusually severe weather, and subcontractor or supplier delays arising from the same causes. But the clause requires written notice to the contracting officer within ten days of the delay beginning. Diarise it.
The Takeover Agreement
Where the surety wants to complete, federal practice routes it through a takeover agreement with the contracting officer rather than through a US performance bond clause. That agreement fixes what the surety is entitled to receive and what it remains bound by — including the contract’s liquidated damages terms, absent an excusable delay.
Wrongful Termination Converts
There is a safety valve. If the default termination is later determined to have been improper, or the delay excusable, the rights and obligations of the parties are treated as though the notice had been issued as a termination for convenience. That is a meaningfully better outcome — but it is decided after the fact, long after your surety has had to act.
The timing rule that catches cross-border contractors is upstream of all of this: on a federal construction contract the performance and payment bonds, and any necessary reinsurance agreements, must be furnished before notice to proceed. Combined with the ten-day window to execute documents after award, that leaves no room to arrange a bonding programme after you win. Settle it before you bid.
How Much, and Where
US Performance Bond Penal Sums Across Three Regimes
The 100 percent federal US performance bond figure is the most quoted number in US surety, and it is also the least representative. State statutes vary widely — some mandate 100 percent, some mandate nothing at all and leave it to the solicitation, and one of the seven states closest to Atlantic Canada uses a single combined bond in a range. Assume nothing.
Federal
100 percent of the original contract price for the US performance bond, and 100 percent for the payment bond, with the payment bond never less than the performance bond. If the contract price increases the Government directs additional security equal to 100 percent of the increase. Bonds are required on construction contracts above $150,000; between $35,000 and $150,000 the contracting officer selects alternative payment protections instead.
The States Nearest You
Maine requires 100 percent performance and 100 percent payment bonds above $125,000. Massachusetts runs two tracks — 100/100 on building work in the filed sub-bid regime, but on other public work only a payment bond at not less than half the contract price. New Hampshire requires security of at least 100 percent above $75,000 for state work and $125,000 for a municipality. Connecticut mandates a 100 percent payment bond but leaves the US performance bond discretionary. Rhode Island uses one combined bond between 50 and 100 percent. Vermont has no general statute at all outside transportation work. New York sets the amount by the contract rather than by statute.
Private and Engineering Work
No statute applies; the owner’s instructions to bidders govern, and 100 percent is the market convention on the standard forms. Engineering-designed work commonly uses the EJCDC form, built on the same conditional architecture and typically written at not less than 100 percent of the bid amount. Read the US performance bond form issued with the solicitation rather than assuming the clause numbering you saw last time.
One more gate sits on top of the amount. On federal work the surety must appear on the US Treasury’s listing of certified companies; on state work it must generally be licensed in that state, and some states put it in the statute — Massachusetts requires a surety qualified to do business in the commonwealth, and Vermont requires one authorised to transact business in the state. Where the bonding statute is silent, the requirement has not gone away; it lives in the state insurance code and in the instructions to bidders. The US bid bond page explains why no Canadian-domiciled surety clears either gate, and you can check any company against Treasury’s published listing yourself.
Underwriting
US Performance Bond Capacity, Indemnity and Cost
A bid bond asks whether a surety would back you at all. A US performance bond asks how much, and for how long. Everything in this section is about that second question, and for most Canadian contractors moving south the binding constraint on a US performance bond is capacity rather than price.
What the Surety Reviews
- Financial capacity, net worth and cash flow
- Assets, and where in the world they sit
- Credit history of the company and its principals
- Work in progress — the single largest driver of available capacity
- Work history, expertise and completed-job record
- The banking relationship and the terms of the operating line
- The nature and complexity of the specific project
- Character of the contractor, which sureties weigh more heavily than lenders do
What Constrains Capacity
- Single-job and aggregate programme limits set by the surety
- The Treasury underwriting limitation — a hard cap on federal work, set as a share of the surety’s capital and surplus
- Co-surety or certified reinsurance where a US performance bond exceeds that limitation
- The 200 percent aggregate penalty when performance and payment bonds are both at 100 percent
- Uncompleted work already bonded on both sides of the border
- Whether the indemnity reaches assets a US surety can realistically enforce against
Terms Worth Negotiating
- Who signs the general indemnity agreement — company, holding company, principals, spouses
- Governing law, jurisdiction and venue for that indemnity
- Whether collateral is required, in what form, and when it is released
- Dual obligee riders, which extend the US performance bond to a lender or upper-tier contractor
- Whether a rider preserves the surety’s defences against the added obligee
- Rate structure across the whole programme rather than job by job
On cost, the only figure worth quoting is the range US industry bodies publish for performance and payment bonds — under half a percent to around three percent of the contract price, with newer contractors at the upper end. Treat that as orientation, not a quote: rates are tiered by contract size and set against your own financials. The bid bond that precedes it is normally issued without a separate premium.
A word on dual obligee riders, because they are routinely presented as a formality. A rider adds a second beneficiary — usually a lender or the contractor above you — to a US performance bond written for one owner. That is a real expansion of the surety’s exposure and therefore of your indemnity exposure, and the wording determines whether the surety keeps its defences against the added party. Read it, and price it into the US performance bond programme, rather than signing it at closing.
Beyond the Bond
What Else Changes Once You Are Actually Performing
Getting a US performance bond in place is the gate. Delivering the contract profitably is a different problem, and these four items are where cross-border jobs most often stop making money. Price them into the bid, not into the change orders.
Prevailing Wages
Federal contracts above $2,000 for construction, alteration or repair of public buildings and public works carry prevailing wage obligations: pay not less than the locally determined rates, pay at least weekly without unlawful deduction, and post the wage scale at the site. The threshold is effectively universal, and many states run their own prevailing wage laws on state work. Failing to price this is the classic way a cross-border bidder wins and then loses money.
Domestic Material Rules
Two regimes, and they are not the same. Buy American under the federal acquisition rules applies to direct federal procurement. Build America, Buy America applies to federally assisted infrastructure — grants flowing to states and municipalities — and requires iron, steel, manufactured products and construction materials to be produced in the United States, with narrow waivers. A state highway job funded by federal money sits in the second regime even though the owner is the state.
Insurance Has to Be US Paper
Workers’ compensation is a state-by-state, mandatory obligation and a Canadian WCB registration does not satisfy it. General liability and auto generally need to be written on US-admitted paper to meet contract and state requirements. Several Canadian markets solve this by partnering with a US carrier so the policy meets state insurance law — but it is a placement to arrange in advance, not a certificate to produce at mobilisation.
Waterfront Work Needs Longshore Cover
Directly relevant to Atlantic marine contractors. The Longshore and Harbor Workers’ Compensation Act covers maritime employment — including harbour construction — on the navigable waters of the United States and adjoining piers, docks, terminals and wharves. A pier, wharf or dredging contract needs Longshore cover in addition to state workers’ compensation, not instead of it.
One more that is not an insurance problem at all: moving your own crews. Professional status under the continental trade agreement covers a listed set of occupations, and construction trades are not on it. You can generally move an engineer, an architect or a scientist south on that basis. You generally cannot move your carpenters, electricians, welders or equipment operators. Labour has to be sourced in the US or another immigration route taken with counsel — and that assumption breaks more cross-border bids than the bonding does.
US Performance Bond FAQs
On federal construction contracts, 100 percent of the original contract price, plus 100 percent of any subsequent increase. The payment bond is written at the same amount and can never be less than the US performance bond. State requirements vary widely and private work follows the owner’s instructions to bidders, where 100 percent is the market convention.
No. The statute requires only a US performance bond in an amount the contracting officer considers adequate for the protection of the Government. The 100 percent number comes from the Federal Acquisition Regulation, which still permits a lower amount on a contracting officer’s determination. The distinction matters if you are reading the statute and wondering where the percentage went.
Because the Canadian convention splits security 50 percent performance and 50 percent labour and material payment, while US federal practice writes both at 100 percent. The aggregate penalty on the same contract value goes from roughly 100 percent to roughly 200 percent. That is a US performance bond capacity question before it is a price question, and it is the first thing to raise with your surety.
Standard Form 25 on federal work. On private and quasi-public work, most often the standard American Institute of Architects performance bond, current edition 2010. On engineering-designed projects — water, wastewater, rural development — the Engineers Joint Contract Documents Committee form, which is built on the same architecture. Always read the form issued with the solicitation rather than working from a version you saw on a previous job.
On the standard private form, a sequence. Notify contractor and surety that it is considering declaring a default; allow the surety to request a conference within five business days, held within ten; then declare the default, terminate the contract, notify the surety, and agree to pay the balance of the contract price. Failure on the first notice is excused only to the extent the surety shows actual prejudice — the later steps are not excused at all.
Four things, and the contractor has no vote. It can arrange for the contractor to finish with the owner’s consent; take over and complete the work itself; obtain bids and tender a replacement contractor with equivalent bonds, paying any excess over the contract balance; or waive its right to complete and either pay what it determines it owes or deny liability with reasons.
Not always. The standard private form caps liability at the US performance bond amount where the surety arranges completion, tenders a replacement, or waives and pays. That list omits the option where the surety performs the work itself, so on the face of the form the cap does not apply there. The 2024 Canadian form is drafted differently — it caps liability at the US performance bond amount under any circumstances.
Federally, yes. Standard Form 25’s conditions extend to performance during the life of any guarantee required under the contract, which brings the standard one-year construction warranty inside the US performance bond. There is no separate federal maintenance bond to buy. On state and private work it depends on the US performance bond form and on what the contract documents require, so check rather than assume.
On the standard US private form, yes — the surety is responsible for liquidated damages, or for actual delay damages where the contract specifies none, plus additional legal, design professional and delay costs. This is the reverse of the 2024 Canadian form, which expressly excludes liquidated damages and indirect or consequential damages. It is one of the sharpest differences between the two markets.
A rider adding a second beneficiary — typically a lender or the contractor above you — to a bond written for a single owner. It is commonly presented as a formality at closing. It is not: it expands the surety’s exposure and therefore yours under the indemnity, and the wording determines whether the surety keeps its defences against the added party. Have it reviewed and priced before you agree to it.
Before notice to proceed on a federal construction contract, together with any necessary reinsurance agreements. Add the ten-day window to execute the contract documents after award and there is simply no room to arrange a bonding programme after you win. The whole programme — capacity, indemnity, collateral — belongs in place before you bid.
US industry bodies publish a range of under half a percent to around three percent of the contract price for performance and payment bonds, with newer contractors at the upper end. Treat that as orientation rather than a quote — rates are tiered by contract size and set against your own financial statements, work in progress and record. The bid bond that precedes it is usually issued without a separate premium.
